Erika takes a loan from Fair View Funding Group in order to renovate a duplex to resale in Elk Grove Village, IL. The price of the property is $280,000. The loan-to-value (LTV) on the note is 55%. This means that Erika will bring 45% of the purchase price to the closing and the principle will be $154,000 on the note. The parameters of the note also include a five point origination fee which will be paid at the closing and a 6 month, interest-only note with a 10% interest rate.
In addition to paying the $7,700 origination fee, Erika will also need to fund $126,000 of the purchase with her own money, or 45% of the purchase price. The monthly interest-only payments will then total $1,283 to Fair View Funding Group. Assuming she sells the remodeled house for $406,000 at the end of the 6 month term, her total profit (not including rehab expenses) would be $110,600. This is calculated by taking the sales price ($406,000) and subtracting the original note amount ($154,000), the origination cost ($7,700), the money she brought to closing ($126,000), and the total interest payments ($7,700).